FT : Daisy Group receives £500m offer

Daisy Group receives £500m offer

Daisy Group, the British telecoms company, has received a take-private offer of almost £500m from a consortium of large shareholders led by its chief executive.
Toscafund, the largest shareholder, has teamed up with fellow investor Penta Capital and chief executive Matthew Riley to make the 185p per share cash offer for the AIM-quoted internet and telecoms services provider.

The 185p offer reflects a premium of 19.4 per cent on the share price at Thursday’s close, although this is slightly lower than the 190p a share preliminary approach made for the company in August.
The group of investors, which already owns 51.5 per cent of the stock, has since been in talks with the Takeover Panel. The consortium needed to make a firm bid or walk away from the deal by October 20.
Shares in Daisy rose almost 10 per cent in London to 170p on Friday after the announcement but fell back to near 160p by Friday afternoon. Daisy Group said that independent directors were “considering the revised terms of the possible cash offer”.
Mr Riley founded the business in 2001 to provide services including hosting and broadband internet connections to smaller business. Daisy has also developed a reputation for making its own acquisitions under Mr Riley since it listed in 2009. Daisy had also been in talks to sell to rival Liberty Global earlier this year.

FT : Pfizer’s AstraZeneca pursuit knocked by Shire deal collapse

Pfizer’s AstraZeneca pursuit knocked by Shire deal collapse

The chances of Pfizer reviving its pursuit of AstraZeneca have been greatly diminished after the collapse of AbbVie’s £32bn acquisition of Shire, according to several people close to the situation.
Pfizer, the biggest US drugmaker, would be free under UK Takeover Panel rules to make a new approach for AstraZeneca from next month when a mandatory cooling-off period ends following its failed £69.4bn bid in May.

However, such a move has become much less likely after AbbVie, another US drugmaker, backed away from its deal with UK-listed Shire because of a White House clampdown on foreign takeovers that allow American companies to cut their US tax bills, these people said.
Pfizer’s thinking could change after the US midterm elections next month if President Barack Obama – who has led the campaign against so-called tax inversions – loses support in Congress.
But AbbVie’s U-turn on Shire has highlighted the increased obstacles facing inversion deals. The Chicago-based company said the new rules had “fundamentally changed” the economics of its proposed acquisition.
Pfizer and AbbVie are among more than a dozen American companies that have sought deals this year to shift their tax domicile overseas to escape the 35 per cent US corporate tax rate – the highest in the developed world. Pfizer had hoped to cut its average tax rate from 27 per cent to 21 per cent by buying AstraZeneca and moving to the UK. The Treasury clampdown has made it harder for companies to use inversions to shield offshore cash from US taxes.
After rejecting Pfizer’s £55-a-share offer in May, AstraZeneca said £58.50 was the minimum level at which it would have considered entering negotiations. Analysts said the Treasury measures had made it tougher for Pfizer to reach such a price.
These analysts said that the chances of a Pfizer approach for Actavis, the Dublin-based generic and speciality drugmaker often touted as an alternative potential target for the US company, had also been reduced.
If an inversion is ruled out, Ian Read, Pfizer’s chief executive, will be under pressure to come up with other ways to boost performance after a period of sluggish growth and lacklustre drug development.
AstraZeneca faced criticism from some shareholders for rebuffing Pfizer. But people familiar with AstraZeneca’s thinking said the AbbVie-Shire collapse reinforced the company’s concern over the political risks involved in inversions.
They pointed out the disruption that would have been caused to its business – particularly its research and development pipeline – if it had agreed a deal with Pfizer only for it subsequently to collapse.
Shares in AstraZeneca, which peaked at £48.23 after Pfizer’s approach, have fallen back to £41.96. But Pascal Soriot, chief executive, has repeatedly voiced confidence in the company’s standalone prospects with several promising experimental drugs in development.
Pfizer and AstraZeneca declined to comment.

Barrons : 13D Filings : Investors report to the SEC

13D Filings
Investors report to the SEC

13Ds are filed with the Securities and Exchange Commission within 10 days of an entity’s attaining a greater than 5% position in any class of a company’s securities. Subsequent changes in holdings or intentions must be reported in amended filings. This material has been extracted from filings released by the SEC from Oct. 9 to Oct. 15, 2014.
Source: InsiderScore.com

Activist Filings
Civeo (CVEO)
On Sept. 25, Civeo announced it would continue as a corporation and redomicile to Canada after it considered, among other things, a potential conversion to a real estate investment trust. Hedge fund Greenlight Capital disclosed that since the announcement, it’s “had conversations” with the board and management of Civeo, and it expects to continue having conversations.

In a filing, Greenlight suggested the company do the following: 1) Take on “leverage to make its capital structure more appropriate for a real estate company;” 2) implement “an aggressive program of returning capital to shareholders through a well-communicated dividend policy; and 3) replace CEO Bradley Dodson, who, Greenlight believes, “has lost the support and confidence” of Civeo’s shareholders.

Greenlight Capital disclosed it owns 10,658,929 shares (10% ofthe voting total ) after it bought 6,158,929 from Sept. 30 to Oct. 9 for $11.89 to $12.99 each. Greenlight also sold 1,654,400 shares from Aug. 13 to Sept. 26 at prices from $24.80 to $25.97.

Darden Restaurants (DRI)
Starboard Value disclosed that “according to the voting results from the 2014 annual meeting, all 12 of Starboard Value’s director nominees…were elected to the board at the 2014 annual meeting.” Starboard did not make any transactions in the past 60 days but owns 11,635,000 shares (8.8%).

Original Filings
Bellatrix Exploration (BXE)
Orange Capital disclosed holdings of 21,618,163 shares (11.8%) after buying the that total amount from July 2 to Oct. 14 at prices ranging from $5.54 to $9.84 per share.

Calithera BioSciences (CALA)
Delphi Ventures disclosed that it now owns 2,403,238 shares (13.6%) after purchasing 500,000 shares in Calithera’s Oct. 1 initial public offering at the $10 IPO price. Delphi did not, in its filing, disclose any specific plans it may have for the company or its reason for holding the stake.

Dermira (DERM)
New Enterprise Associates disclosed that it now owns 3,502,922 shares (14.1%) after purchasing 69,112 shares in Dermira’s Oct. 8 IPO at the $16 IPO price. New Enterprise didn’t disclose any specific plans or proposals.

Separately, Bay City Capital disclosed that it now owns 3,506,647 shares (also 14.1%) after purchasing 69,112 shares in Dermira’s IPO. Bay City added that it “acquired the shares for investment purposes with the aim of increasing the value of the investment and the company.”

Increases in Holdings
Altisource Asset Management (AAMC)
Luxor Capital Group increased its holdings to 7,338,891 shares (11.8%) after buying 39,217 shares from Sept. 12 to Oct. 14 at prices in a range of $619.27 to $700.

Decreases in Holdings
Dolby Laboratories (DLB)
The Dolby Estate decreased its holdings to 52,66,1166 shares (51.6%) after it sold 445,459 shares from Sept. 9 to Oct. 10 via a 10b5-1 trading plan, at prices in a range of $40.54 to $45.22 per share.

Patrick Industries (PATK)
Tontine Partners decreased its holdings to 2,340,529 shares (22.1%) after it sold 70,030 shares from Aug. 15 to Oct. 6 at prices in a range of $42.00 to $43.97 via a 10b5-1 trading plan. Tontine previously disclosed that its 10b5-1 trading plan is allotted to sell 150,000 shares and has 14,099 shares remaining.

Barron's : Asia’s Most Promising Stock Markets

Asia’s Most Promising Stock Markets
Southeast Asian markets have proved more resilient than others in the turmoil. So which countries are the best plays?

Global markets last week caught the recent bout of economic gloom. Remarkably, Southeast Asian countries, heavily shorted last year, did not lead the selloff in Asia. In fact, Japan’s Nikkei is now off nearly 9% for October, while the Asean bloc is down just 3%.

But as economic recovery worldwide looks increasingly shaky and liquidity dries up, the emerging Southeast nations increasingly will be forced to vie for a lower level of foreign-capital inflows. Where should we put our money? Look for countries with secular growth drivers, and avoid those overly reliant on external demand, advises Anthony Nafte of Asia-based brokerage CLSA. Exports in Indonesia and the Philippines constituted only about 30% and 37%, respectively, of the economies’ gross domestic product in 2013, whereas in Malaysia and Thailand, it was about 100% and 76%.

Indonesia is Nafte’s favorite. It is about to usher in a reform-minded president and is at the trough of its business cycle, growing just 5% a year. Infrastructure spending can jump-start the economy, as long as incoming President Joko Widodo reduces fuel subsidies and builds more roads. My column last week explained why raising fuel prices is the key to solving Indonesia’s twin problems of current account deficit and slowing growth (“Don’t Give Up on Indonesia”). For U.S. investors, a good vehicle is the iShares Indonesia ETF (ticker: EIDO).

Another favorite, the Philippines, is the fastest-growing economy in Southeast Asia, averaging 6.8% in annual output gains. Its young, energetic President Benigno Aquino III has clamped down on corruption, and business sentiment has flourished. Investments grew at a double-digit rate in each of the past two years. Robust remittances from overseas Filipino workers also provide support. One way to play the Philippines is the iShares MSCI Philippines ETF (EPHE).

Thailand doesn’t have a big driver of growth. It has averaged only 2.7% GDP growth annually over the past seven years, and the government was tossed out in a military coup in May. Weak export demand won’t help private consumption, and Thailand can no longer depend on easy credit. Household debt has risen sharply.

Malaysia is an odd case. The national economy is heading for strong 6% growth this year. But the equity market is suspect because it’s so dependent on government-linked funds. The top four, including the sovereign fund Khazanah and the mandatory pension fund EPF, collectively own 60% of Malaysia’s biggest 30 listed companies. As a result Malaysia, with its elevated valuations and stock prices unresponsive to shifts in earnings, “does not behave like a real market,” says CLSA’s Anand Pathmakanthan. Malaysia trades at 15 times forward earnings, more expensive than Indonesia and Thailand, despite weaker earnings.

Nomura Securities’s Mixo Das orders his country picks differently because he thinks the current selloff was caused by prospects of weaker growth, but the next one will be a result of the winding down of the carry trade (in which investors sold low-yielding U.S. dollar-based investments to buy higher yielding foreign-currency holdings). Strong support from government funds, for instance, means a broad selloff is less likely in Malaysia, and it’s therefore a good place to “hide,” he says. Foreigners already were net sellers of Thai equities this year, especially in May, so there isn’t much more damage to be done here. Indonesia, in his opinion, is a high-risk trade based on its big current account deficit.

Barron's : Market Rout Brings Out the Bargain Hunters

Market Rout Brings Out the Bargain Hunters
Euro-zone stocks have been in a slide. For some investors, it’s the return of the 2011 sovereign debt crisis. For others, it means bargain-hunting.

Dow Jones Global Indexes|Global Stock Markets

Plunging equity markets sent many investors running for shelter last week, while the stouthearted stuck around to snap up value stocks at bargain prices.

The sudden downturn caps a steady month-long stock market slide prompted by a confluence of negative factors. They include fears that countries such as the U.S. and China may not spur global economic growth in the way many had hoped. On top of that came more headlines on the spreading Ebola virus and continuing political strife around the world.

In Europe, investors were unnerved by further signs that Germany—Europe’s biggest economy—is struggling. More troubling still was the euro zone’s apparent failure to lift inflation from dangerously low levels, despite recent intervention by the European Central Bank.

Data released on Thursday showed that euro-zone inflation dropped to a five-year low of 0.3% in September, sparking sharp stock market losses across Europe.

For European investors, those now-choppy markets looked and felt scarily like the dark days of 2011’s sovereign-debt crisis, with government-bond yields rising in Spain, Greece, and Italy—the former lightning rods of that time.

European markets recovered some lost ground on Friday but still ended the week lower. The Stoxx Europe 600 index and the Stoxx Europe 50 fell almost 1%. They have each dropped by over 7% in the past month.

Many investors rushed to get their money into safe-harbor assets such as German government bonds, driving them to new record highs by midweek. Others saw the selloff as an opportunity to buy value stocks at knock-down prices.

George Godber, who manages the Miton Value Opportunities fund for British-based money manager Miton Group, was among the latter. He doesn’t believe that the current market rout means Europe has plunged back into crisis. Instead, he thinks it has thrown up a number of stock bargains.

Among his current favorites are two British stocks—house builder Bellway (ticker: BWY.UK), and the recently listed TSB Banking Group (TSB.UK).

Godber says Bellway is among a group of large British home builders that have benefited from a shift in market dynamics in recent years. “There used to be a lot of small British players in this market, building maybe 15 properties at a time,” he says. “When banks tightened lending, only the bigger companies could raise the cash needed to buy land.”

The sector has also been aided by the British government’s Help to Buy scheme aimed at assisting first-time buyers. The plan offers financial assistance to property buyers of up to 600,000 pounds ($957,000). It was due to be wound up next year but was recently extended to 2020 by British Chancellor George Osborne.

Bellway last week reported that its full-year pretax profit rose 75%, to £245.9 million. It sold 6,851 homes over the period and forecast further volume growth of 10% this year.

Jefferies analyst Anthony Codling describes the company as “a solid, well-run business, in our view, which offers an attractive entry point at the current price.” He has the stock at Buy and last week lifted his target price to £24.47. Bellway closed on Friday at £16.09.

ALONGSIDE THIS IS TSB, one of several so-called challenger banks being championed to boost competition in the British finance sector after the number of players shrank sharply following the 2008 financial crisis.

Its parent, Lloyds Banking Group (LYG.UK), had to be bailed out by British taxpayers after it came close to collapse. The European Union subsequently ordered Lloyds to sell at least 600 branches as a condition for approving the state aid it received.

In June, it sold 35% of TSB through an initial public offering that valued the bank at £1.3 billion. TSB has over 600 branches and more than 4% of British checking accounts. “It’s a very clean bank,” Godber says. “It has a capital ratio of about 17% and trades at 0.8 times book value, compared with a United Kingdom average of about 2.5 times among challenger banks.”

One negative factor is the continuing stock overhang from the 50% stake Lloyds still owns after selling more shares last month. It has to dispose of the rest of TSB by the end of 2015.

Investec analyst Ian Gordon last week upgraded TSB to Buy and lifted its target price to £2.95. “TSB shares have sharply underperformed versus U.K. domestic peers over the past eight weeks, falling 10%, while Barclays [BCS.UK], Lloyds, and Royal Bank of Scotland [RBS.UK] have risen by 2% to 3%,” he says. “We believe [TSB has] unparalleled tail-risk protection, a high-quality loan book, low-cost funding, and outsize capital ratios,” he adds. “However, it now offers relative cheapness that, we think, adequately compensates for a weak near-term return-on-equity outlook.” The stock closed on Friday at £2.57.

Barron's : Big Money Poll: The Bull Will Be Right Back

Big Money Poll: The Bull Will Be Right Back
America’s money managers say stocks will resume their climb after a short but needed time out, according to our latest Big Money Poll.

It’s going to take a lot more than the past month’s 5%-plus selloff in stocks for America’s money managers to change their upbeat tune. That’s what they’ve been telling Barron’s in the past two weeks, ever since 59% of participants in our latest Big Money poll said they were bullish or very bullish about the outlook for U.S. stocks through the middle of 2015. That’s up from 56% in our spring survey, but below last fall’s bullish reading of 68%.

The nation’s professional investors aren’t blind to the alarming developments that have tripped up the market in recent weeks, including evidence of slowing economic growth in key parts of the world, spreading violence in the Middle East, and even a possible Ebola pandemic. They are also worried about a coming change in Federal Reserve policy after years of falling interest rates, which provided a huge tail wind for stocks and other risk assets.


Equities will outperform other assets in the next 12 months, and U.S. shares will do best. The Big Money managers expect financials, health care, and tech stocks to lead the market higher. Scott Pollack for Barron's
Indeed, two-thirds of Big Money managers noted in our survey that they expect a correction, defined as a 10% drop in share prices, within the next 12 months. Whether smart or simply lucky, they’re suddenly looking prescient.

Still, the pros expect decent growth in corporate earnings and moderate equity valuations to put a floor under the market. They believe the bull market that began in 2009 will resume after an unpleasant but arguably healthy time-out.

BASED ON THEIR mean forecasts in the Big Money poll, the bulls see the Dow Jones industrials topping 18,360 by the middle of 2015, and the Standard & Poor’s 500 index hitting 2173. While their targets, which imply a gain of about 12% for the Dow and 15% for the S&P 500, might seem aggressive after last week’s rout, their commitment to U.S. equities remains intact.

Andrew Slimmon, a senior portfolio manager at Morgan Stanley Global Investment, whose Chicago-based group manages $4.1 billion of equities, notes that Europe’s economic troubles sparked a selloff in U.S. stocks in 2010 and in 2011, just as concerns about another European recession are sending tremors through the market today. “The fear then was that contagion from Europe would cause a recession in the U.S.,” Slimmon says. “It came at a time when the U.S. economy was more fragile. Afterward, the market came back strongly. This time, the U.S. economy is on stronger footing. The magnitude of the decline likely won’t be as large, and the rebound could be greater.”

To Joel Tillinghast, co-manager of the $46 billion Fidelity Low-Priced Stock fund, the allure of stocks seems obvious. Money-market funds pay holders little to nothing, whereas stocks with decent dividends pay enough to compete with bonds—and offer the possibility of capital gains. The economics are particularly compelling given five or 10 years of compounding. “People will gradually realize that equities are a superior alternative,” he says.

U.S. equities are especially attractive, Tillinghast adds. “Numerical predictions will either be right or wrong,” he says. “I’d urge people to consider that the greatest growth opportunities come from American-centric industries, and that interest rates aren’t going up. People are freaked out now, but fantastic opportunities have been created by the fact that America is less dependent on imported oil, and is a leader in biotechnology and social media. America has one of the strongest economies in the world.”

Many biotech and social-media shares reside on the Nasdaq, and disproportionately influence the value of the Nasdaq Composite. The Nasdaq has slid 7% since Sept. 2, to a recent 4258, but our bullish respondents are enthusiastic about its prospects. They see a near-20% recovery in the offing that could leave the index near 5000 by the middle of next year.

“People see upside [in the Nasdaq] because they see the pace of innovation in Silicon Valley and biotechnology, even though valuations are starting from a higher price,” says Christopher Ailman, chief investment officer of the California State Teachers’ Retirement System, or CalSTRS, which oversees $186.4 billion.

As for the broader market, Ailman says, “This may indeed be the 10% correction I was anticipating. But we will have a discussion tomorrow and likely talk about buying opportunities, not selling, because the fundamentals of the economy haven’t changed. The GDP [gross domestic product] forecast still has a nice, positive trend. Corporate earnings aren’t growing as fast as in the past, but they are still growing.”

THE BULLS’ CAMP has drawn modestly this fall from the undecided, as 31% of managers now say they are neutral about stocks, down from 35% in the spring. The bears’ ranks are essentially unchanged at about 9%.

Notwithstanding the bullish tilt of our poll, 71% of Big Money managers consider the market fairly valued—or at least they did when the survey was e-mailed a few weeks ago and the Dow was closer to 17,200 than today’s 16,380. But this is less of a contradiction than it might seem. “Historically, markets don’t stop at fair value, but go past it,” says Robert Lutts, president and chief investment officer of Cabot Wealth Management in Salem, Mass., which oversees $550 million. “Prices are getting up there, but we have none of the excesses that marked the top of previous markets.”

Lutts thinks worries about a rate hike have been exaggerated, while the benefits of falling energy prices have been ignored. Crude oil prices have fallen more than 20% since mid-July, to a recent $83.02 per barrel, while gas prices have slipped below $3.30 a gallon at the pump.

“People don’t appreciate how much of a plus they get from lower oil and gas prices,” he says. “It’s like a tax reduction.”

Charles Lemonides, founder of ValueWorks, a New York hedge fund with $250 million under management, agrees. He predicts the price of oil will drop to $75 a barrel by mid-2015, spurring further reductions in gasoline prices and putting more money into consumers’ wallets. Nor did he see signs, before the market’s recent tumble, of the euphoria that typically signals a bull market’s end is near. Many stocks were “quietly” correcting while the averages marched higher, he notes. “The froth just isn’t the same as at previous peaks,” Lemonides says. “I’m more inclined to be buying today than I was six months ago.”

Chances are he won’t be alone. Eighty percent of Big Money respondents say they expect to be net buyers of stocks in the next 12 months; just 20% expect to be sellers.

PROFESSIONAL INVESTORS are more bullish these days than the people whose money they manage. Nearly 70% of Big Money managers say their clients are neutral about U.S. equities, compared with just 21% who claim their clients are bullish.

The managers regard geopolitical crises, earnings disappointments, higher interest rates, and a more sluggish economy as the biggest threats facing U.S. stocks in coming months. In the plus column, they cite rising corporate profits, higher GDP growth, better employment news, and any decision by the Fed not to raise short-term interest rates as the factors most likely to get stocks back on track.

More corporate merger and acquisition activity, a pickup in China’s economy, and steps toward U.S. tax reform also could light a fire under share prices, they say.

Despite the challenges ahead, or perhaps because of them, 70% of Big Money managers expect equities to outperform other asset classes in the next 12 months.

A distant 9% think that either real estate or commodities will be the safest haven. Looking out five years, 80% of managers favor equities, something to remember as you’re surveying the wreckage after last week’s storm.

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More than 70% of Big Money respondents expect the U.S. to be the best-performing market in the coming year, but only 30% see America dominating equity markets in five years. Emerging markets could be ascendant again, as a rising middle class in developing countries controls a greater share of the world’s wealth. The global market has changed “dramatically” since 2008, says Joseph Parnes, founder of Technomart Investment Advisors in Towson, Md., who cites new sources of wealth emerging in Asia.

Even so, 84% of poll respondents say they’re bullish on large-cap U.S. stocks in the near term, while 94% say they’re bullish over a five-year horizon. U.S. small-caps also could win more fans as they start to recover. Joseph Ray, president of Dallas-based Gerald L. Ray & Associates, which manages $700 million, calls the U.S. “the best house in a bad neighborhood.” U.S. companies, he notes, have strong balance sheets and plenty of cash, and ample opportunities to grow by doing deals.

The managers are split on the near-term prospects for Europe and Japan, but nearly 60% favor emerging markets. They expect to develop more enthusiasm for foreign markets in the years ahead. They like cash more than they did last spring, at 37% bulls versus 21%, but gold doesn’t glitter for them. Only 24% of poll respondents are bullish on the 12-month outlook for bullion, although 38% favor gold over five years.

FINANCIAL STOCKS are the managers’ favorites these days, with 28% expecting them to lead the market in coming months. Rick Seto, managing director at Pasadena, Calif.–based Flaherty & Crumrine, which oversees $5 billion, gives thumbs up to Bank of America (BAC), whose litigation overhang, he says, has largely passed. BofA trades for $16.21, or about 0.8 times book value, versus a peer-group average of 1.2 times book. He thinks the stock could rally to $21 or so in the next 12 months as the U.S. economy continues to recover.

Health care and tech stocks also could lead the market, according to poll respondents. Utilities have the poorest prospects, in their view, followed by consumer-cyclical shares.

As for individual stocks, Apple (AAPL) remains a hands-down favorite of the Big Money men and women. Some have been seduced by the company’s groundbreaking products—Apple recently unveiled a watch, a mobile-payment system, a new generation of iPhones, and new iPads and iMacs—and some, by the low valuation of the shares. At a recent $97.67, Apple fetches a mere 10 times estimated 2015 earnings of $7.33 a share, after stripping out the $28-a-share of cash on the company’s balance sheet.

Schlumberger (SLB), the Houston-based oil-services leader, is another Big Money pick (and the subject of a positive cover story, “Right on Target,” in the Aug. 18 issue of Barron’s). The stock has been hammered since June, falling 20% to $93.97. It trades today for 14.6 times next year’s expected earnings of $6.64 a share, and sports a dividend yield of 1.65%. Analysts are forecasting an 18% rise in 2015 earnings per share. Slimmon, the Morgan Stanley manager, expects oil-services companies such as Schlumberger to be early beneficiaries of the next upswing in oil prices.

The Big Money managers also espy plenty of overvalued issues, prominently including electric-car maker Tesla Motors (TSLA), Amazon.com (AMZN), and Alibaba Group Holding (BABA), the Chinese mobile-commerce giant whose shares went public last month in the largest new-issue offering in history. The deal priced at $68 per American depository receipt and the stock opened at $92.70. The ADRs were changing hands late last week at around $88, or 37 times future earnings.

The managers likewise said they consider Netflix (NFLX) overvalued. The stock plunged $86.89, or 19%, Thursday, to $361.70, after the video-streaming company reported disappointing third-quarter subscriber growth.

THE BIG MONEY POLL is conducted twice a year, in the spring and fall, with the help of Beta Research in Syosset, N.Y. The latest survey drew responses from 145 portfolio managers from across the country, representing some of the largest investment companies in America and many smaller firms. Barron’s has been conducting Big Money for more than 20 years to get professional investors’ read on the financial markets and the economy.

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Even the Big Money bears are looking somewhat bullish after stocks’ latest slide. Their mean bearish forecast put the Dow at 16,600 by year end and 15,900 by June 30, 2015. But numerical predictions, again, don’t come close to reflecting their concerns or downbeat market perspective.

Marc Heilweil, founder of Spectrum Advisory Services, an Atlanta manager with $530 million in assets, had the lowest forecast in our fall survey. He expected the Dow to trade around 16,500 at year end, but plummet to 13,000 by mid-2015. “The earnings growth hasn’t been there,” Heilweil says. “Consumer-spending patterns aren’t ready to turn. And corporations increasingly are run on a financial basis, with an emphasis on buying back stock instead of spending to grow.”

Based on our poll, others agree. Forty percent of Big Money managers think capital spending is the best use of corporate cash today, while 42% favor dividend payments. Only 18% believe companies are spending most wisely when they buy back shares, although lower stock prices could make buybacks more attractive for a while.

Guy Scott, a portfolio manager at Janus International Equity Fund, a $1 billion-in-assets manager in Denver, also has been bearish of late. “The U.S. market is overvalued,” he said recently. “The S&P 500 has risen for five years in a row. Very rarely does it go up a sixth consecutive year. Also, China’s economy is slowing. The risk is that it slows more than people expect.”

Scott pegged the Dow’s year-end close at 16,300, although he expects stock prices to rise in the first half of 2015.

IF MOST BIG MONEY managers are bullish to neutral on stocks, they are overwhelmingly bearish on bonds—for the next 12 months and five years. Consider this 12-month tally: 91% are bearish on Treasuries; 86%, on U.S. corporate bonds; 81%, on non-U.S. bonds; and 68% on tax-free municipals. Only 3.5% of managers expect bonds to be the best-performing asset class in the next 12 months, which probably says more about their hostile view of equities.

Don’t write off bonds altogether, however, as 44% of managers expect their fixed-income portfolios to generate positive returns in the next year. The bond market continues to confound, as its safe-haven status is buoying prices and depressing yields even further. The yield on 10-year Treasuries slipped below 2% last Wednesday, before ending the week at 2.22%.

“Have any predictions proved more consistently wrong than the prediction since 2012 that interest rates would rise?” asks Peter Scholtz, founder of Scholtz & Co., a $140 million asset manager in Norwalk, Conn.


The Federal Reserve is scheduled to end its third and final round of quantitative easing, or bond buying, this month, provoking further anxiety among investors. QE and other strategies have kept interest rates at near-zero levels for the past few years, to allow the economy and banking sector to recover from the 2007-’09 financial crisis and recession. The central bank isn’t expected to start lifting the federal-funds rate, to which other rates are tied, until sometime next year.

Seventy-six percent of Big Money respondents look for the Fed to act in the second or third quarter of 2015, although 8% don’t see a rate hike coming until sometime in 2016. Four percent predict it will occur even later than that.

Weakness in the rest of the world might buoy the U.S. stock market as this year winds down, says Donald Sazdanoff, founder of Sovereign Asset Management in Mansfield, Ohio, with assets of $65 million. He predicts the Federal Reserve will raise rates with an eye to that weakness, doing so only gradually. “If the Fed raises rates next year, it will do so very slowly or incrementally so as not to disrupt the market,” he says.

By keeping short-term rates at 0.25%, the Fed is punishing savers and painting itself into a corner, Sazdanoff says. Federal Reserve Chair Janet Yellen will want to get short rates up, he argues, to be able to stimulate the economy when the next real recession hits. Otherwise, the Fed will be left without monetary tools, he says.

JUST OVER HALF of Big Money managers see 10-year Treasury yields sitting at 3% a year from now. Another 27% think yields will have climbed to 3.5%. Peering out five years, 70% see yields of 4% to 5%. But don’t look for the stock market to swoon when interest rates finally start to rise. Fifty-three percent of managers anticipate stocks will advance in the six months after the Fed starts raising interest rates, while just 31% expect the market to weaken.

Fed Chair Yellen gets resounding applause from the Big Money crowd, in the form of an 82% approval rating. While her predecessor, Ben Bernanke, set upon a course of unprecedented monetary easing as the global banking system nearly collapsed, Yellen might have the more difficult job of mopping excess liquidity to avoid inflation. “She’s trying hard to give clear guidance, while also allowing the Fed some flexibility, given the economic uncertainty,” says CalSTRS’ Ailman.

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THE GLOBAL ECONOMY, whose health was called into question broadly last week, looks pretty sound to our respondents, 63% of whom expect it to strengthen in coming months. “All things are in place for global growth to accelerate,” says Robert Turner, chairman of Turner Investments, in Berwyn, Pa., which manages $2 billion. “The Japanese and European economies are getting better. We’re also encouraged by the possibilities of an investor-friendly India.”

The U.S. economy looks solid, too, with 58% of managers forecasting U.S. GDP growth of 3% to 3.5% in the next 12 months. “The public underestimates the trauma caused by the 2008 crisis,” says Thomas Luddy, manager of the $10.5 billion J.P. Morgan U.S. Equity fund. “The economy is still recovering from it. That’s why there is room for reasonable growth.”

Most managers expect the U.S. unemployment rate to settle in the 5.5%-to-6% zone; it was 5.9% in September, according to the Bureau of Labor Statistics. A smaller percentage than in the spring survey look for the housing recovery to continue—68% to 81%—and a greater percentage are concerned about the threat of inflation: 56% now, versus 51% in the spring.

The dollar has been the world’s go-to currency in times of turmoil, and the managers, by a wide margin, expect the buck to continue to strengthen against both the euro and the yen.

WHILE THE BIG MONEY managers are glued to the markets, they’re also keeping a close watch on Washington, where next month’s elections could alter the composition and priorities of Congress. Our seers, by a 91% margin, expect the Republicans to retain control of the House of Representatives. Sixty-three percent also predict the GOP will gain control of the Senate.

Yet, only 57% think Republican control of both houses will be positive for the stock market. Harlan Cadinha, chairman of Cadinha & Co. in Honolulu, which manages $1 billion, worries that the GOP’s aversion to spending might slow the economy’s gains.

This has been an active year for financial journalists, but hardly a winner for investment professionals. Just 49% of managers say they are beating the market professionally, while 54% confess that they’re doing so personally. If last week’s pullback is as healthy—and temporary—as the Big Money folks say, both the stock market and the pros could have a better 2015.

(BN) Investors Shaken as Week of S&P 500 Reversals Ignite Volatility



Investors Shaken as Week of S&P 500 Reversals Ignite Volatility
2014-10-18 04:00:01.2 GMT


By Eric Lam and Joseph Ciolli
Oct. 18 (Bloomberg) -- David Wolf, a fund manager at
Fidelity Investments in Toronto, says equity spasms such as
those that shook global stocks this week scare professionals as
much as everyone else.
“My dad has been quite panicky,” Wolf said of his father,
Bernard, a retired economics professor from Canada’s Schulich
School of Business. “He knows what markets are all about and he
knows what the economy is all about, and even he gets scared”
when stocks rise and fall this fast.
One of the most volatile five days for stocks since the
financial crisis ended yesterday with the Standard & Poor’s 500
Index rallying 1.3 percent to 1,886.76. That pared the decline
since Oct. 10 to 1 percent and handed investors a fourth
consecutive weekly retreat. The benchmark index slumped as much
as 3 percent on Oct. 15 before recovering in the biggest swing
since 2011.
Stocks slid, recovered and lurched again as concerns
mounted that Europe will slip into a recession just as Federal
Reserve bond buying ends. Speculation that Ebola is spreading,
concern about the health of the global economy and selling by
hedge funds sent the Chicago Board Options Exchange Volatility
Index above 26 on Oct. 15, a two-year high.
Earnings season got under way with Netflix Inc. tumbling 21
percent for the week after a price increase slowed subscriber
growth. JPMorgan Chase & Co. slid 4 percent, the most since
August, after net income fell short of forecasts.
The Dow Jones Industrial Average retreated 163.69 points,
or 1 percent, to 16,380.41. The Nasdaq Composite Index lost 0.4
percent.

‘Buying Opportunity’

Wolf, part of Fidelity’s global asset allocation team, said
the firm has been getting more calls from clients worried about
the market’s losses. Very little about the outlook for the North
American economy has changed, he said, adding that the drop is a
buying opportunity not seen in months.
While Canada’s S&P/TSX Composite Index was essentially
unchanged for the week, the index had two days of losses of
about 1 percent and then reversed with two days of approximate 1
percent gains.
“This was a really spectacular week to watch,” Herbert
Perus, who helps oversee $36 billion as head of equities at
Raiffeisen Capital Management in Vienna, said in a phone
interview. “A lot of risks came into the minds of short-term
orientated traders.”

Hedge Funds

Stocks favored by professional speculators saw some of the
biggest swings. The 20 stocks in the Russell 1000 Index in which
hedge funds hold the biggest stakes have tumbled 8.4 percent
since the beginning of October, twice the rate of the full
index.
Small-cap stocks staged the biggest rally since June as
investors began to regain confidence. After sliding 13 percent
from March 4 to Oct. 13, the Russell 2000 Index rebounded with
three days of gains exceeding 1 percent. The index ended the
week up 2.8 percent.
The S&P 500 is still down 6.2 percent from a record a month
ago. Pressure is mounting for European Central Bank stimulus
such as government-bond purchases as the 18-nation euro area
struggles to rebound from a sovereign debt crisis and subsequent
austerity measures.
Speculation that central banks will step in to support the
economy fueled gains at the end of the week. The ECB will start
“within the next days” to purchase assets in the new program
to support the economy, Benoit Coeure, an executive board
member, said on Oct. 17. St. Louis Fed Bank President James
Bullard said the previous day that policy makers should consider
delaying the end of bond buying.

Airline Shares

Robert Stimpson, a fund manager in the Ohio town visited by
an Ebola-infected nurse, said his conversations have been
dominated by concern over the disease. Transportation shares
were whipsawed by speculation the spread of Ebola will hurt
travel plans, with the Bloomberg U.S. Airlines Index losing more
than 6 percent on Oct. 13. The gauge finished the week up 4.2
percent.
Chimerix Inc., a drug maker working on a treatment for
Ebola, had a weekly gain of 10 percent. Lakeland Industries
Inc., a manufacturer of disposable protective gear with a market
value below $100 million, slid 14 percent. The stock has doubled
in the past month.
“The market got to a position where it was prone to
weakness and it happened to occur at the same time that scary
news such as Ebola was rolling out,” Stimpson, who works at Oak
Associates Ltd. in Akron, Ohio, said by phone. “It’s a
confluence of factors coming together to lead to a very
difficult two weeks in the market.”

For Related News and Information:
Developed Market View: DMMV <GO>
Graphing: GRAPH <GO>
Feature stories on stocks: TNI STK GREET <GO>
World Trends and Reversals: WT <GO>
Equity screening: EQS <GO>
Top Stocks News: TOP STK <GO>

--With assistance from Jonathan Morgan in Frankfurt.

To contact the reporters on this story:
Eric Lam in Toronto at +1-416-203-5725 or
elam87@bloomberg.net;
Joseph Ciolli in New York at +1-212-617-3928 or
jciolli@bloomberg.net
To contact the editors responsible for this story:
Lynn Thomasson at +1-212-617-0506 or
lthomasson@bloomberg.net
Jeff Sutherland

(BN) Billionaire Bollore Seeks Control of French Ad Company Havas



Billionaire Bollore Seeks Control of French Ad Company Havas
2014-10-17 22:00:00.0 GMT


By Kristen Schweizer and Marie Mawad
Oct. 18 (Bloomberg) -- Vincent Bollore is seeking to boost
his stake in Havas SA, in a move that would give the French
billionaire majority ownership of one of the world’s largest
advertising companies and more say in how it’s run.
Under the proposal, minority shareholders will get 9
Bollore Group shares, adjusted for a 1-for-100 stock split, for
every 5 Havas shares they hold, according to an e-mailed
statement yesterday. That’s a 19.5 percent premium to the French
ad company’s stock price and values it at 2.8 billion euros
($3.6 billion). Bollore Group currently owns about 36 percent of
Havas and would keep its Paris listing.
Havas, with annual sales of about 1.8 billion euros, is
France’s second-biggest ad firm, though ranks a distant No. 6
globally in the industry. The ad company would benefit from
better access to capital, said Bollore Group’s Chief Financial
Officer Cedric De Bailliencourt.
“This transaction gives Havas the benefit of the solid
financial resources of Bollore and the full benefit of the
Bollore Group’s international presence,” De Bailliencourt said.
Bollore is looking to “go beyond” a 50 percent ownership
stake in Havas, as well as “increase the free float of the
Bollore capital structure,” the CFO said.
Vincent Bollore, Bollore Group’s CEO, who has a net worth
of $4.5 billion, according to the Bloomberg Billionaires Index,
is also Chairman of Vivendi SA and a minority shareholder in
that company. After announcing more than $30 billion of asset
sales since last year, Vivendi is looking for opportunities to
expand its content production and distribution businesses.

Vivendi Expansion

Increasing his stake in Havas “will raise some questions
about whether Bollore’s end-game is to sell Havas to a third
party,” Ian Whittaker, an analyst at Liberum Capital Ltd.,
wrote in a note. “Vivendi will also inevitably get linked,
especially given its financial firepower post-disposals.”
Bollore Group yesterday appeared to try to quash
speculation surrounding a future sale.
“We have no intention to sell our controlling interest in
Havas,” the CFO said on the call.
Havas and Bollore Group shares were suspended in Paris
yesterday before the announcement. Havas last traded at 5.71
euros for a market value of 2.35 billion euros. Bollore Group
rose 3.1 percent to 378.85 euros, valuing the company at 10.4
billion euros. The holding company also has interests in
banking, shipping as well as electric cars.
Financiere de l’Odet shares last traded at 822 euros before
they halted trading.
“By strengthening its capital position through this public
offer, the Bollore Group underlines its will to pursue its long-
term commitment to Havas,” Yannick Bollore said in a separate
statement released by Havas. Yannick, Vincent’s son, took over
as chief executive officer of Havas in January.
A $35 billion merger between Omincom Group Inc. and
Publicis Groupe SA to dethrone advertising market leader WPP Plc
unraveled this year partly because of management clashes.

For Related News and Information:
Billionaire Bollore Returns to Brittany With Batteries Plant
NSN MTFLW16JIJUT <GO>
Interpublic CEO Roth Sees Ad-Industry Deals After Failed Merger
NSN N7C17Q6K50XY <GO>
Havas Chief Bollore May Acquire Assets in Technology, Content
NSN N2S7M66TTDS5 <GO>
Top Media: TOP MED <GO>
Top Stories: TOP<GO>

To contact the reporters on this story:
Kristen Schweizer in London at +44-20-7330-7526 or
kschweizer1@bloomberg.net;
Marie Mawad in Paris at +33-1-5530-6290 or
mmawad1@bloomberg.net
To contact the editors responsible for this story:
Kenneth Wong at +49-30-70010-6215 or
kwong11@bloomberg.net
Niamh Ring, James Callan

>>> US Close Dow+1,63% S&P+1,29% Nasdaq+0,97% Russell-0,35%

Closing Market Summary: Cyclical Sectors Pace Upbeat Finish to Defensive Week

The stock market capped a cautious week with a rally that sent the S&P 500 higher by 1.3%. The Russell 2000 (-0.3%) underperformed, but the small-cap index still ended the week higher by 2.8% versus a 1.0% decline for the S&P 500.

Equities spiked at the start of the session after overnight comments from central bank officials boosted investor sentiment. To that point, European Central Bank executive member Benoit Coeure said that ECB purchases of asset-backed securities are set to begin within days, while Bank of England Chief Economist Andy Haldane also walked the dovish line, saying that recent economic data speaks in favor of delaying the BoE's first rate hike.

The comments were met with a rally across Europe, while U.S. futures spiked to ensure a higher start for the major averages. The Dow, Nasdaq, and S&P 500 spent the first two hours of the session in a steady climb, but reversed from their highs around noon ET and surrendered almost a third of their gains. For its part, the Russell 2000 gapped up at the open and retreated steadily throughout the session.

Interestingly, the early advance received significant support from high-beta areas like chipmakers and biotechnology, but session-long profit taking and the weakness of the small-cap index pressured high-beta groups from their highs.

The iShares Nasdaq Biotechnology ETF (IBB 265.21, +4.23) was up in excess of 2.5% at the start, but narrowed its gain to 1.6% by the close. Meanwhile, the health care sector (+1.6%) settled among the leaders.

Elsewhere, the PHLX Semiconductor Index notched its high during the initial 15 minutes, but narrowed its gain to 0.8% by the close. SanDisk (SNDK 82.80, -2.51) weighed, falling 2.9%, after its cautious guidance overshadowed better than expected earnings. For its part, the tech sector (+1.2%) settled just behind the S&P 500. Most large cap components held up well, but their strength was masked by a 2.6% decline in the shares of Google (GOOGL 522.97, -13.95) after the company reported disappointing quarterly results.

Another cyclical sector—industrials (+2.0%)—spent the day in the lead after General Electric (GE 24.82, +0.57) and Honeywell (HON 90.06, +3.67) reported better than expected results. General Electric beat bottom-line estimates by a penny, which has been a common theme for the conglomerate. Excluding today's report, the past five quarterly results from GE revealed either in-line results or one-cent beats.

Transport stocks also contributed to the strength of the sector with the Dow Jones Transportation Average (+1.5%) boosting this week's gain to 3.2%.

Today's advance caused participants to reduce their hedges, pressuring the CBOE Volatility Index (VIX 22.11, -3.09) to Monday's levels. However, VIX futures remained in backwardation with October contracts demanding the highest premium, which suggests options traders remain on the lookout for turbulence in the near-term.

Treasuries ended in the red with the 10-yr yield climbing four basis points to 2.20%.

Participation received a boost from options expiration with more than a billion shares changing hands at the NYSE floor.

Economic data was limited to Housing Starts/Building Permits and the preliminary reading of the Michigan Sentiment Survey:

* Housing starts increased 6.3% in September to 1.017 million from a slightly upwardly revised 957,000 (from 956,000), while the consensus expected an increase to 1.013 million 

* Single-family construction rebounded after a one-month decline, increasing 1.1% to 646,000 from 652,000 in August  * Multifamily housing starts increased 15.6% to 371,000 in September after falling 28.0% in August 

* The University of Michigan Consumer Sentiment Index increased to 86.4 in the preliminary reading for October from 84.6 while the consensus expected a decline to 84.0 

* Sentiment levels are at their highest point since July 2007  * Over the past couple of weeks, severe volatility in the equity market resulted in a sharp drop in stock market prices. The effect on the consumer, however, was negligible

There is no economic data of note scheduled for a Monday release.

* S&P 500 +2.1% YTD  * Nasdaq Composite +2.0% YTD  * Dow Jones Industrial Average -1.2% YTD  * Russell 2000 -6.9% YTD 

>>> Weekly Market Update: The Correction That Wasn't

Weekly Market Update: The Correction That Wasn't

Market volatility reached epic levels this week. By Wednesday afternoon, the S&P500 had given up than 4% on the week after a series of unfortunate events hammered risk assets, drove liquidation and raised fear the dreaded correction had arrived. However most of the gap was filled in the second half of the week as the soothing possibility of more central bank easing emerged. On Wednesday, the withdrawal of Ireland's exotic tax avoidance laws, which inspired AbbVie to cancel its $54 billion merger with Shire, slammed many US hedge funds that were long Shire in an arbitrage trade. The same day, talk that the Greek anti-euro, anti-bailout opposition had strengthened its influence drove a massive sell-off in European peripheral debt, further hurting many US hedge funds that were long the instruments. On top of that the Ebola scare reached a fever pitch with false alarms across the US, though only one additional case was confirmed. The combined effect was risk asset liquidation, driving the VIX index above 30 for the first time in nearly two years. Commenting on Wednesday's market action, Goldman Sachs' CFO said investors were "shooting first and asking questions later." Then on Thursday, the ECB said it would adjust haircuts on bonds used as collateral for loans to Greek banks and Fed Governor Bullard said the FOMC should consider delaying the end of the QE taper this month to help stem the slide in inflation expectations. Both announcements helped propel a move higher, aided by some better US data late in the week and a round of mostly solid earnings reports.

For the week, the DJIA dropped 1%, the S&P500 fell 1% and the Nasdaq lost 0.4%. The Nasdaq briefly entered correction territory on Wednesday, joined by the Japanese Nikkei Index on Friday, while the S&P500 reached 9.5% off of September's high before rebounding. The market stampede was even more jarring in the bond market, as the US 10-year dove 43 basis points between last Friday's close and the height of the fear on Wednesday before closing back at the key 2.20% level on Friday.

The data out on Wednesday suggested the global slowdown may be finally catching up with the US economy. September US retail sales were negative (-0.3% v -0.1%e; Control Group: -0.2% v +0.4%e), with the key control group, which is used to help calculate GDP, way off expectations. That was the first negative reading for the series since January, when severe winter storms depressed the series temporarily. September PPI producer prices were softer than expected, teeing up a soft CPI reading. The New York Fed's Empire manufacturing index was well under expectations, with the new orders component turning negative.

In Europe, markets tested Mario Draghi's "whatever it takes" position after developments in Greece provided an opportunity for attack. Peripheral bonds sold off hard late on Tuesday and into Wednesday after a poll in Greece showed the anti-bailout, anti-euro party Syriza with a 6.5% lead over the governing New Democracy party, well ahead of the 1.4% lead seen in the last round of polls. There is a presidential election in Greece in February, which could be followed by early parliamentary elections. Greece's bailout is officially over in little more than a year, but PM Samaras would like to end it early in order to get ahead of his Syriza opponents, who talk often about getting Greece out of the eurozone. The rush to end 1% bailout government financing and jump into public markets, at a rate more around 7% (or the prospect of Grexit) drove the stampede out of Greek debt and a big drop in the stock market, both of which shocked wider European equities and sent peripheral debt spiking higher.

The Irish government confirmed that it will eliminate its notorious "double Irish" tax structure, just a few weeks after the US Treasury said it would put up roadblocks to tax inversion deals. The first victim of the changes was the $54 billion AbbVie/Shire merger (Shire is headquartered in Ireland). The implosion of the deal was cited as one of the factors deepening the sell-off on Wednesday. Many hedge funds had long Shire/short AbbVie arb trades riding on the merger and Shire shares lost over 20% as the deal unravelled, pummeling the funds and forcing liquidation. Recall that back in July, AbbVie's CEO said the tax benefits were an advantage in the Shire acquisition but were not the central rationale behind the deal. AbbVie will have to pay Shire $1.6 billion to break their engagement.

European governments are wrangling with 2015 budget planning and the process is exposing many of the very stresses that have prevented the Eurozone from escaping the long reach of its crisis. Budgets proposed by France and Italy both abandon pledges to bring deficit-to-GDP ratios into compliance with the 3% treaty limit. Last Friday S&P cut France's sovereign outlook, and on Wednesday Fitch put France's AA+ sovereign rating on negative watch. German Chancellor Merkel said there could be no exceptions to the EU deficit rules even as French President Hollande demanded flexibility, setting up another axis of tension in the EU.

The German government cut its GDP growth forecasts for 2014 (from 1.8% to 1.2%) and 2015 (from 2.0% to 1.3%), bowing to the reality of the European economic slowdown. Berlin insisted it would not change course on policy or austerity despite the worsening outlook. Merkel said that the government would still pursue its balanced budget goals.

The two cases of person-to-person Ebola transmission in the US appeared in Dallas, Texas. Two nurses who helped care for Thomas Duncan, the Liberian man who died last week, tested positive for the disease. There was widespread consternation on reports that the second nurse was cleared to travel to Ohio and back by air while also beginning to feel certain symptoms, including fever, associated with the disease. There was a cascade of Ebola scares in Ohio, San Diego, aboard a Caribbean cruise ship and other locations from people who had unknowingly travelled with the second nurse, although as of now there are still only two Ebola cases in the US, the nurses.

The growing rift in OPEC pummeled oil prices this week, and front-month WTI crude sank below $80 for the first time since June 2012. Persian Gulf states were said to be targeting crude prices around $70 with the aim of making US shale production uneconomical, and were said to be opposing any OPEC production cuts at the November meeting due to fears they could permanently lose market share. Non-Persian Gulf OPEC nations plus Iran pushed for the organization to adopt a production ceiling of 30M bpd. Venezuela called for an emergency OPEC meeting, but its demand largely fell on deaf ears. The IEA Monthly Report trimmed global oil demand growth forecasts for 2014 to their lowest level in five years and also trimmed its 2015 demand forecast. The IEA said any more crude oil price declines would require lower demand or supply cuts.

Wall Street banks had largely good news in their quarterly reports. Goldman Sachs reported excellent third-quarter results and raised its dividend nearly 10%. Revenue was up 25% y/y and net income rose a whopping 60% y/y. Morgan Stanley had similarly strong results. JPMorgan's profits were slightly lower than expected, but compared favorably with the loss seen a year ago. Bank of America either reported income of $168 million or a small loss in its third quarter, depending on how the bank's massive $5.8B DoJ fine for mortgage issues is counted. Shares of Citibank soared after the bank said it would exit stagnant business in 11 countries and modestly topped expectations in its third quarter.

Shares of railroad CSX gained after reports asserted that the company had rebuffed a merger proposal from Canadian Pacific last week. If a deal were reached, the companies would have a combined market value of $62 billion. Big regulatory obstacles stand in the way of a merger - the US Surface Transportation Board has a history of intervening in mergers over fears that the industry would end up with just two North American transcontinental railroad systems.

Overall volatility also whipped around currency trading this week, although there appears to be a slight strengthening trend in the euro as the single currency rises off the record lows seen in the first week of October. EUR/USD came into the week around 1.2610 and after the excitement on Wednesday appeared to be consolidating around the 1.2800 level. Meanwhile, the yen also strengthened, with USD/JPY declining from highs of 107.70 to lows around 105.5 on Thursday, before closing out the week around 106.65.

The Shanghai Composite fell 1.4%, the biggest weekly decline in four months, as the mainland index turned increasingly less immune to the global market rout amid a set of mixed economic figures. September Trade Balance hit a 5-month low of $31B, even though the y/y increase in imports and exports marked 7- and 19-month highs respectively. New Yuan Loans were also more encouraging at CNY857B - a 3-month high and well above the CNY746B consensus. Inflation indicators were still decidedly subdued however, as 1.6% CPI marked a near 5-year low while PPI of -1.8% was down on the year for the 31st consecutive month. Monetary authorities are taking notice with further incremental liquidity injection measures. On Tuesday, the PBoC lowered the offering yield on its 14-day repo by another 10bps to 3.4%. On Friday, the PBoC also announced an additional CNY200B injection directly into the banking system targeting 20 joint-stock Chinese banks. The balance of key China economic data for September along with Q3 GDP will be released early next week, followed by the October HSBC flash manufacturing PMI on tap for Thursday.